Neosocialism in Metaverse and Neufeudalism on top of them: A new hybrid socio-economic model
Annotation. This article examines the main factors that hinder the positive development of civilization. The authors consider these factors in detail through the prism of the development of the digital economy. They give an overview of the impact of these factors on digital business models of organizations and the changes that these processes bring to states and society. As a result of the analysis, the authors identify two models of social and economic structure in the “post-covid” economy, namely Market based Socialism 2.0 and Digital Neo-feudalism 2.0, and give an overview of the advantages and disadvantages of both models. At the end of the paper the authors describe the approaches to the implementation of the Market based Socialism 2.0 model and conclude that this model is the most attractive for states and society in the “post — covid” economy. So far it looks like that this shall be possible to build, for instance, in Metaverse. Now it becomes clear, that there will be a set of Metaverses with an interoperability. It is also becomes evident, that on top of these metaverses with neosocialism powered by DeFi inside, there will be in fact a neofeudalism on top of these metaverses, owned by corporations.
Authors: Prof. Dr. Vladimir Kunin, Dr. Aleksei Minin.
Key words: Digital economy, Business model transformation, COVID 19, Market based Socialism 2.0, Digital Neo-feudalism 2.0, DeFi, Metaverse
Introduction
The beginning of the 21st century was marked by the unprecedented emergence and development of the digital economy, the implementation of which in the last year was forced by the COVID-19 pandemic. States and companies have been forced to respond swiftly to these processes, which has further accelerated the pace of digitalization. The acceleration of digital transformation is a multifaceted process that, along with the fundamental expansion of opportunities, poses additional threats to the sustainable development of civilization, which we will discuss in this article.
Factors hindering the positive development of civilization
For today we can distinguish 4 main factors hindering the vector of positive development of civilization, and increasing, threats to its further existence.
These factors include:
- Uncontrolled growth of the population, especially in the poor underdeveloped countries of Africa, Asia and Latin America;
- The growing gap between the rich and the poor, the growth of social inequality;
- Intensification of struggle, including armed struggle, for resources and markets;
- Uncontrolled growth of migration flows.
In responding to these threats, it is necessary to take into account both rapid technological changes and, in particular, the digital transformation [Ducci, 2020], as well as changes in people’s mentality and level of pragmatism.
Digitalization of consumption, business models and approaches to the growth of companies’ capitalization
It should be noted that existing threats, and in particular threats to food, environmental and climate security, in the context of the limited resources of the planet, invisibly shift consumption into the digital sphere. The reasons for this shift are due to the relative cheapness of consumption of digital products and services compared to physical consumption. Moreover, the shift in consumption from the physical to the digital sphere offset the effects of limited physical consumption for one reason or another. This process has led to the fact that the capitalization of digital giants has exceeded the capitalization of the largest companies in other sectors of the economy, and trade is actively moving from off-line to on-line with a corresponding redistribution of capital [Goldfarb et al., 2019]. This process transforms the usual approaches to understanding the factors of changes in the capitalization of companies and requires a transition to a portfolio approach to product and project management.
In parallel with this process, the process of transforming the business models of organizations is launched in order to adapt the latter to the growing consumption in the digital economy. Platformization of business models, namely the formation of marketplaces and infrastructure platforms, leads to increased economic efficiency and, consequently, to the transformation of competitive barriers. If previously the competitiveness of the business model was ensured by the presence of “space-time” barriers (the more space a business occupied, such as a network of branches, and the more time it took to create its infrastructure, the better the business was protected).
The digital economy transforms classic competitive barriers into the area of “speed — risk,” i.e., how fast a business model can bring products to market while managing the risk of not achieving capitalization growth targets. New approaches to business model management are built on generating the enormous amount of data needed to automate business management.
These circumstances give rise to the necessity of processing huge data arrays caused by the exponential growth of knowledge accumulated by states, companies and mankind [Kaku, 2011], the importance of solving problems of counteracting global threats and the need to fundamentally accelerate the development of nanobiotechnology and safe thermonuclear energy. This need stimulates the development and implementation of systems with elements of artificial intelligence and quantum computers. From this point of view, digital transformation generates new problems and threats. Thus, when creating “deep artificial intelligence” there is a threat of its escape from human control. And while today this threat seems very remote, it will become more and more real as time goes on.
It should also be noted that the prolonged exponential growth of high-tech companies’ capitalization causes the market bubble to inflate and increases the risk of stock market collapse. Considering that the value of derivative financial instruments alone exceeds the annual GDP of the entire world economy by more than an order of magnitude, there is a threat of an avalanche-like escalation of negative processes in financial markets into a global economic crisis, which was already observed during the global crisis of 2008–2009.
Reducing the need for human capital
The COVID-19 pandemic stimulated remote contacts and the development of remote forms of work. When the acute phase of the pandemic passes, the proportion of remote work will no longer be the same, which on the one hand has many pluses, but raises many questions about the preservation of the mental health of the planet. Another important aspect is the desire of companies to autonomy in the production of products and services, which can significantly reduce the need for human capital. Simply put, many risk “not going back to work” and becoming unclaimed in today’s economy. In one section of Great reset, Prof. Schwab points out that one of the necessary resets, beyond macro and micro economics, would be a reset of humanity. In this case the risk of dystopia is high [Schwab et al., 2020].
The problem of the harmonious development of the “post-covid” economy
The problem of harmonious and sustainable development of a “post-covid” economy (i.e., an economy that will exist after the pandemic is overcome) is and will be very acute. As the scale of the economy and capitalization of large corporations grows, both the scale of periodic economic crises and the severity of their social and economic consequences will grow. Here we can draw an analogy with the aquatic environment: the deeper and larger is the reservoir, the greater is the excitement that can be observed in it. And if after the crisis of 2008–2009 the economy began to recover noticeably in less than a year after the start of the crisis, the crisis of 2020, caused by the Covid-19 pandemic, will drag on for a longer period (according to estimates by Prof. Schwab in his book “Great reset” [Scwab et al, 2020] the duration of the acute phase of the crisis may be up to 5 years, and the economic consequences will be felt for at least 40 years). The growing amplitude of crisis waves increases the gap between the rich and the poor, increases social instability and contradictions between countries. Covid-19 clearly demonstrated a natural state egoism, when even within the European Union, under conditions of vaccine shortages, the member states of the Union began to “pull the blanket over themselves” and a conflict arose over the unfair, in — opinion of some (mostly less economically important) countries) distribution of vaccines among the states.
Under the conditions of increased external crisis risks, there is a need for coordinated preventive anti-crisis measures aimed at identifying the precursors of the global crisis and countering crisis risks. But these measures should be coordinated not only within individual countries, but also on a global scale, and be comprehensive, which in the context of existing interstate contradictions and fierce competition at the state and corporate levels makes their development and adoption extremely difficult.
Nevertheless, in light of these circumstances, there is a need for market regulation of the boundaries of economic processes. But how to implement such market regulation without limiting the rights and freedoms of citizens and, in particular, entrepreneurs? Sufficiently successful experience of development and, no matter how paradoxical it sounds, regulation of the market economy exists in China, but there it is carried out under the conditions of a one-party system. Therefore, for countries with a multiparty system, its blind copying is both impossible and unnecessary.
During the 2008–2009 crisis, even then U.S. President Barack Obama spoke about the need to regulate “bank” processes at financial markets, and specifically at the market of financial derivatives. But as soon as the crisis subsided, talks about regulation subsided as well. And there’s nothing surprising about that. After all, the higher the market volatility, the greater the amplitude of crisis waves, the greater fortunes can be made on financial markets, especially when possessed with insider information.
However, despite the obvious opposition, we, one way or another, will come to the need to determine the “banks of the market river” to stabilise market processes and prevent unacceptably high market volatility. But who and how will define these “river banks”, determine and implement the instruments of regulation? This is the main and most sensitive question. Harsh government regulation, as we have seen in a number of countries in the recent past, has led in these countries to the emergence of a commodity deficit, a low standard of living for the vast majority of the population compared to the majority of the population of countries with market economies, large-scale restrictions on the rights and freedoms of citizens. Therefore, the model of such regulation is unacceptable. It is clear that the regulation we are talking about should be market-based, but stronger than at present, and based on the implementation of the principles of the development of a safe, socially just, and humane society, developing in harmony with the world around us. The main problem: who and how will ensure the implementation of these principles? The history of mankind shows that their realization in a traditional consumer society is impossible. It is possible only with a conscious change of people’s inner target life attitudes from striving for material values and power to striving for the development of personal and professional qualities, for maximum return to the surrounding humane and socially-just world. Without this, the implementation of any models of economic development will be cosmetic and will not solve the root problems of safe and moral development of our civilization.
Transformation of the socio-economic structure
As a result of the analysis of the spiral of development of modern civilization, as well as historical socio-economic models, at least two possible new models that can replace the existing today. The authors conventionally call them “Neofeudalism 2.0” and “Market Socialism 2.0”.
The first one — “Digital Neofeudalism 2.0” is the result of transition to the post-capitalist world order, outlined in part in the works of Karl Marx [Mason, 2016]. This model has a number of characteristic features, the implementation of which can already be observed in a number of developed countries today:
- The interests of society are placed above individual rights and freedoms — the principles of the “Shared Economy” as an example;
- The transition to a new socio-economic contract, shaped, perhaps, by the largest corporations, whose capitalization now exceeds the value of individual countries, which in turn calls into question the expediency of the institution of the family, the need to preserve cultural heritage and cultural code, racial diversity and other differences inherent in people and countries;
- A possible gradual abandonment of national interests in favor of globalization.
The goal of this kind of socio-economic model is to abandon the concept of the state and transition to a fundamentally new approach to the world order. A number of recent works by a large number of economists, futurologists and philosophers in the field of development of natural digital monopolies, mega-cities-corporations, etc. testify to the possibility of such a scenario. [Rushkoff, 2016].
The second model, is the result of the transformation of the market economy into a more efficient economy, built in the interests of the state, but provided that the interests of the state do not destroy the market mechanism and focused on the social — social contract, aimed at ensuring the interests of society. Here are some characteristics of this socio-economic arrangement:
- The need for business to follow a certain “state plan”, with the understanding that it exists for the stability of all ecosystems rather than individual agents (Transition from Shareholder to Stakeholder Capitalism) [Harrison et al. , 2019];
- Improving the efficiency of microeconomies and transitioning to an efficient macroeconomy as it digitizes;
- Preservation of national interests;
- Strengthening the role of the state while necessarily preserving the market mechanism;
- Preservation of the risk of creation of natural monopolies and market consolidation under the condition of non-interference of the state.
Both models, as follows from their characteristics, have their shortcomings, and their more precise characteristics we have yet to realize, formulate and describe.
In this paper the authors would like to focus on a more detailed description of the process of formation of the second model “Market Socialism 2. 0” and the possible approach to its creation.
Transformation of the state in the “Market Socialism 2.0” model
Recently, especially in Russia, we can observe a powerful transformation of the banking sector. The reasons for this transformation are clear, and we can observe the consequences in real time. As we accumulate data and develop approaches to modeling ecosystems, banking processes and banking itself will evolve. The evolution of banking will follow the path of transition from a segmented approach to liquidity management to liquidity management of the counterpart ecosystem and further to liquidity management of the entire economic system — the establishment of an efficient capital market in the interests of the national economy. And here, the principles of DeFi (Decentralised Finance in Etherium) becomes very interesting and promising.
If we generalize banking experience and implement it on a national scale, for optimal management of supply and demand chains, we can confidently say that optimal systems of economic management of the country in the interests of the economy as a whole, rather than its individual agents, will release a huge potential that is not realized in market conditions. The reason is related to the fact that most economic agents often act only in their own interests and not in the interests of their partners [Nash, 1951].
If economic agents acted not only in their own interests, but also in the interests of their competitors, it would not destroy the value not only of individual companies, but also on a national scale. A simple example is the crisis of overproduction, caused by the high historical market price of certain goods, which leads to market crashes and manufacturers’ losses. It is known that the supply and demand chain in agriculture is realized by business only if there are no more than three to five constraints on its way (lack of logistics, trade restrictions, quality requirements, difficulties in attracting financing, etc.). The “Gosplan 2.0” system of optimal management of the country’s economy should not be based on an inefficient nomenclature of “functionaries” who lack the competence and data to build it, but on the analysis of big data using artificial intelligence algorithms. If government systems learned to find barriers to supply and demand chains, which is the essence of “Gosplan 2.0” system, a country like Russia could increase its export revenues from agribusiness products alone by more than 20% of today’s values. On the scale of the entire world economy, the development of such management systems can give multiples of the effects. Thus, we can talk about doubling or even tripling the economy by increasing its transparency, efficiency, and predictability.
Thus, in digital socialism, the revolution of economic markets will be accomplished in three stages by identifying potential supply and demand chains, identifying obstacles to the operation of these chains through the liquidity management platform of economic agents, and financing projects to remove the identified obstacles. This will create efficient commodity and cash flow markets for businesses under market conditions.
Conclusions
Thus, the “Great Reset” triggered by digitalization and amplified by the pandemic, as described by Prof. Klaus Schwab [Schwab et al., 2020], will transform the role of states, companies and people’s lives. It is already well underway and raises questions about the image of the near future. We are likely to see a short-term strengthening of the role of states in trying to solve social problems, and a strengthening of the role of corporations in trying to offer a “more profitable” social contract, and a rejection of shareholder principles in favor of stakeholder principles [Harrison et al., 2019]. This will lead to a different speed of company processes and the growth of their capitalization, a blurring of the role of states, as well as the threat of the transformation of the concept of privacy and the denial of a number of rights and freedoms in addressing societal problems in favor of corporate interests. Countering these threats is possible in the way of improving the moral character of man and, as a consequence, the development of a synergistic approach to entrepreneurship, focused not only on profit, but also on the satisfaction of a wide range of socio-economic needs of members of society.
Open question: there were many proofs, why socialism model is not sustainable. One can ask, but what if this is possible in Metaverse for instance? DeFi, absence of physical consumption paired with absence of national / gender / ethical / income differences?
Now it becomes clear, that there will be a set of Metaverses with an interoperability. It is also becomes evident, that on top of these metaverses with neosocialism powered by DeFi inside, there will be in fact a neofeudalism on top of these metaverses, owned by corporations.
More to come on this…
References
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[3] Nash John, Non-Cooperative Games, The Annals of Mathematics 54(2):286–295, 1951.
[4] Mason Paul, PostCapitalism: A Guide to our Future, 2016.
[5] Rushkoff Douglas, Throwing rocks at the Google bus: How growth became the enemy of prosperity, 2015.
[6] Kaku Michio, Physics of the Future: How Science Will Shape Human Destiny and Our Daily Lives by the Year 2100, 2011.
[7] Schwab Klaus, Malleret Thierry, COVID-19: The Great Reset, 2020.
[8] Harrison Jeffrey, Barney Jay, Freeman Edward, Phillips Robert, The Cambridge Handbook of Stakeholder Theory, 2019.
